Lumber Distributors
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 4,500 lumber distributors and wholesalers in the US act as middlemen between suppliers, retailers, and builders. Companies purchase stock and custom-ordered materials from sawmills, plywood and engineered wood product manufacturers, importers, and foreign suppliers and resell them to retailers, builders, lumber yards, and manufacturers. Firms may also provide engineering services or product modification such as cutting or planing wood to specified sizes or thicknesses.
Demand Tied to Residential Construction
Demand for lumber is largely tied to residential construction spending, which is cyclical and influenced by economic conditions.
Fluctuating Lumber Costs
The prices that manufacturers charge for wood products can fluctuate significantly and rapidly, driven by variability in underlying commodity costs.
Industry size & Structure
The average lumber distributor employs 24-25 workers and generates $22 million annually.
- The lumber distribution industry consists of about 4,500 firms that employ 114,000 workers and generate about $98 billion annually.
- Plywood, veneer, millwork, and wood panel wholesalers account for 60% of firms and 49% of revenue. Lumber distributors account for 40% of firms and 51% of sales.
- The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for 50% of industry revenue.
- Only 1.5% of firms earn $100 million or more annually; those firms account for 29% of industry sales.
- Large firms include BMC/Builders First Source, Forest City Trading Group, US LBM. Some of the largest firms, like Rex Lumber, still operate regionally.
Industry Forecast
Lumber Distributors Industry Growth
Recent Developments
Mar 22, 2024 - Industry Growth to Flatten
- The lumber distribution industry is expected to experience moderate sales growth in 2024 after a softening of demand in 2023 and some solid gains in the years during the pandemic. The industry’s year-over-year sales rose 5.1% in 2020, 23.4% in 2021, and 15.9% in 2022 before falling to -0.3% growth in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales are projected to rise 1.4% in 2024, then see average annual growth of about 4.4% in 2025, 2026, and 2027, according to Inforum and the Interindustry Economic Research Fund, Inc.
- US multifamily construction starts are expected to slow further in 2024 after mounting weakness in 2023, according to the National Association of Home Builders (NAHB). In 2023, multifamily starts fell 14% to 472,000 units. Multifamily starts are forecast to drop 20% in 2024 to 379,000. About 1 million multifamily units are currently under construction, the most since 1973. High levels of fresh inventory coming online will hinder new apartment building activity. A tight lending environment and high borrowing costs also challenge multifamily projects. The NAHB expects the residential remodeling market to remain flat in 2024 compared to 2023, then grow by about 2% in 2025. Remodeling is supported by a lack of existing homes on the market, high homeowner equity, and the aging of US housing stock.
- Apartment buildings are getting taller amid sustained demand for rentals, scarcity of land, and some cities’ willingness to change zoning rules to attract development, according to The Wall Street Journal. Between 2021 and 2023, US cities added more than 2,900 buildings with more than 200 units, a 17% increase of the number built between 2018 and 2020, according to property data firm Yardi. High interest rates and single-family home prices continue to prop up demand for rentals, even among those with relatively high incomes. Some cities are easing some zoning rules, such as minimums for parking. The economics of multifamily development have also changed. Higher construction costs mean buildings need to have more units to be profitable.
- Home builder confidence improved in March amid a lack of existing homes on the market and moderating mortgage rates that remained below 7%, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose three points to 51 in March 2024, which marked the highest HMI reading since July 2023 and the fourth consecutive month of strengthening confidence. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The NAHB said that while lower interest rates have improved affordability and drawn more buyers back to the market, 2024 could bring supply-side headwinds, including shortages of workers, materials, and available lots.
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